How would you like to increase your new business’ chance of succeeding by 33 percent? Sounds good, right? Leading business researchers claim that the secret for success is to take risks. But how do you decide if a particular risk is worth taking — especially if it could lead to negative consequences? If you’re an avid risk-taker, you’re likely to see your business thrive at a faster rate; however, don’t discount those who are risk-averse, as there are ample opportunities for business success when you proceed with caution.
Passion to profit — it’s the objective that every business owner aspires to meet. Unfortunately, the majority of new business owners miss the target. As you probably know, it’s exceedingly difficult to start and grow a new business. According to USA Today, only about 20 percent of businesses survive past the first year. Of those that make it past year one, 50 percent make it to year five, and only about 30 percent make it to year 10.
A risky proposition
There’s an inherent risk that comes with starting a new business, but there’s also risk associated with staying at your current, unfulfilling job just because you’re afraid of failing. You don’t want to be left wondering, “What if?” As a businessperson, your job isn’t to avoid risk, but to manage it. Since the highest chance for failure is present during the first year of new business operations, it’s especially important to initially identify the biggest risk factors facing your new company and to manage them accordingly. One of the first risky decisions that you’ll have to make is whether to quit your day job to pursue your new venture full-time.
Here are the factors to consider before making this decision:
- Will your new business generate enough income to replace your current salary?
- Do you have money saved that you’re willing to invest into your new business?
- Will your decision affect anyone other than yourself? Does your family depend on you financially?
- How much time are you willing to put into your new business?
- If you don’t execute your business idea immediately, will you miss the window of opportunity?
An additional factor to consider before quitting your day job is your personality type. According to a podcast from Harvard Business Review, there are four different types of business leaders out there: the Driver, the Explorer, the Crusader, and the Captain. Each category is defined by an individual’s personality traits, priorities, and values. Determining the category of leader that matches your personality may help you to decide on the best course of action to take when starting on a new business path.
Best of both worlds
Researchers have also identified a group of business owners referred to as “hybrid entrepreneurs” (for brevity, I’ll refer to this group as “hybrids”). Hybrids are more risk-averse, and are typically careful planners. As such, they keep their current jobs while starting their new businesses on the side. They only leave their jobs once their new businesses are ready to meet or exceed their current salaries.
Some examples of successful hybrids include Steve Wozniak (Apple), Pierre Omidyar (eBay), and 20 percent of the CEOs included on Inc. Magazine‘s list of the 500 fastest-growing private companies.
How does being a hybrid impact your new business’ chance of success? Research shows that companies initially founded under a hybrid model are 33 percent more likely to survive than companies whose founders immediately quit their old jobs to work on their businesses full-time. This means that by keeping your day job until your new business can replace your current salary, you’re more likely to start a successful company.
This strategy may also decrease your and your family’s stress levels as you transition between the vastly different roles of working for versus running a company. Even though you may not have as much free time to work on your new business while you’re still working at a nine-to-five job, you’re more likely to save up the necessary funding to find good freelancers who can work on your new business for you — this will help you learn how to manage other people, a critical part of any company’s success. Some freelancers might become your business’ first full-time employees.
The choice is yours
On your journey from passion to profit, you’ll have to decide whether to immediately quit your day job to focus entirely on starting your business, or to keep your day job and work on building your company during your free time while maintaining a secure flow of income. While high-risk business success stories are often mythologized, this doesn’t mean taking that risk-taking is necessary for success or that it has to be your story, too.
Remember to consider your personality, resources, and dependents when making the tricky decisions regarding your new company. Only you can decide whether or not to leave your job to start a new business. It’s your choice to execute your ideas immediately, or to wait until the timing feels right.